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Policy Direction and Determinant Factors on Globalization Performance of Korean Knowledge-based Service SMEs

Author Lee Youngjoo et al. Date 2019.12.20 Page

With the acceleration of the service-driven global economy, the service of the manufacturing industry, and the service of service, the nations of the world are raising their policy interest in enhancing the competitiveness of the knowledge-based service industry. In particular, with the global spread of the Fourth Industrial Revolution, the strategic importance of knowledge-based services is increasing so that the global competitiveness of knowledge-based services determines itself the industrial competitiveness.

The industrial vitality of countries that adhere to the manufacturingoriented growth strategy is more and more falling. Developed countries are boosting their economic and industrial vitality by fostering knowledge-based service industries that drive manufacturing competitiveness. Korea has also been trying to foster its industry as part of the manufacturing service trend. Though the knowledge-based

service industry is appeared to has its competitiveness, there are so many promotion policies and programs that need to be resolved. It is expected that the policy outcomes can be achieved only when the policies that consider the internal and external environment of the knowledge-based service industry and corporate characteristics are strengthened. Above all, there is a demand for policy reinforcement to enhance the capacity of knowledge-based service SMEs that lead the competitiveness of service as well as manufacture industry.

Globalization is a prerequisite for strengthening the capacity of knowledge based-service SMEs. The SMEs will have to actively globalize to expand their markets and explore innovative resources for sustainable growth. However, the global status of knowledge services is not high. SMEs that settle in a narrow domestic market without globalization efforts are likely to suffer from small competition due to the exposure to domestic excessive competition. On the other hand, global market-oriented SMEs can increase their capabilities by not only finding effective customers, but also building partnerships with global actors with innovative resources or experiences that can compensate for their shortcomings. However, government policy to promote their globalization does not appear to be sufficient and effective..

The globalization of knowledge-based service SMEs that use intangible materials as their competitive advantage is known to be very different from its of manufacturing companies. Nevertheless, research on the globalization of the knowledge service industry and related companies is insufficient. Although the government intends to strengthen the globalization of knowledge services, there is a side in which globalization policies cannot be systematically implemented due

to insufficient research or basic facts.

In such a situation, KIET(Institute of Industrial Economics and Trade) established an empirical econometrics model on the globalization characteristics of the knowledge-based service industry and SMEs, and the process of securing global capabilities, and then conducted empirical quantitative analysis. In order to make up for the limitations of theoretical quantitative analysis, we also analyzed the actualization of globalization and case studies of SMEs. Based on the analysis results, we suggested policy directions and policy tasks to promote globalization of knowledge-based services industry and SMEs. Such research resules will contribute to the establishment of a mid and long-term policy direction to strengthen global competitiveness of the knowledge-based service industry and SMEs. In addition, this study is expected to contribute to the implementation of the national policy agenda such as the servicetization of our economy and the successful implementation of the Fourth Industrial Revolution by ultimately advancing the advancement of the knowledge-based service industry.

This research was conducted by research director, Youngjoo Lee Ph.D., Senior Research Fellow at Center for SMEs & Venture Business Research in KIET. KIET hopes that this paper will contribute not only to lead the growth of our knowledge-based service industry and related companies, but also to device strategic and policy measures for innovative growth and vitality of Korea economy.